Glossary of Mortgage and Home Equity Terms

A

Abstract of title A written history of ownership to a specific area of land. An abstract of title covers the period from the original source of title to the present time and summarizes all subsequent documents that have been recorded against that area.

ACH (Automatic Clearing House) Electronic system that deducts funds from one authorized bank account and electronically transfers the funds to another account.

Acquisition costs Costs of acquiring property other than purchase price. Examples may include attorney fees, title insurance, and lender fees.

Acquisition loan See Land Acquisition Loan.

Addendum An agreement or list added to a contract, agreement, or other document. FHA and VA loans, for example, require an addendum be added to a sales contract (the offer) if it is written before the appraisal is done.

Additional principal payment When a customer pays more than the scheduled payment amount. This type of payment is typically made to reduce the remaining balance on the loan.

Adjustable-rate mortgage (ARM) A mortgage with an interest rate and payments that adjust at scheduled dates based on a pre-selected index.

Adjusted gross income A person's total income, as reported on his or her IRS 1040 tax return form, after allowable contributions, deductions, and expenses.

Adjustment period The amount of time between interest rate changes on an adjustable-rate mortgage (ARM), after the initial fixed rate ends.

Alimony Periodic payments made under a divorce decree or a written separation agreement toward the support of a former spouse.

ALTA See American Land Title Association.

American Land Title Association (ALTA) A national association of title insurance companies, abstractors, and attorneys specializing in real property law. The association represents and speaks for the title insurance and abstracting industry and establishes standard procedures and title policy forms.

Amortization Gradual payment of a debt in regular, periodic installments of combined principal and interest over a specified period of time.

Amortization schedule A mortgage payment timetable showing the amount of each payment that's applied to both principal and interest, and the remaining balance after each payment.

Annual percentage rate (APR) The cost to borrow money expressed as a yearly percentage. For mortgage loans, excluding home equity lines of credit, it includes the interest rate plus other charges or fees. For home equity lines, the APR is just the interest rate.

Applicant A prospective borrower who has completed an application.

Application A collection of data a customer provides (verbally, electronically, or on a printed form) to a mortgage lender that includes required information to begin the home loan process.

Appraisal A report that states an estimate or an opinion of the property value as determined by a qualified independent third-party known as an appraiser. The term also refers to the process for obtaining the estimated value of the property.

Appraised value An opinion of value reached by a qualified independent third-party known as an appraiser based upon knowledge, experience, and a study of pertinent data.

Appraiser An independent third-party qualified to estimate the value of real estate and personal property.

Appreciation An increase in the value of property due to a positive improvement to the property or to real estate in the area. Commonly used to describe an increase in value through inflation.

APR See Annual Percentage Rate.

ARM See Adjustable-Rate Mortgage.

Arm's-length transaction Legal slang meaning that no special relationship exists between the parties involved in a transaction, which would contaminate the result.

As separate property Ownership in real property that is to be specifically excluded from community property.

Assessed valuation The value a local tax authority places on real estate or personal property for taxation purposes.

Assessment A tax or monetary charge placed against a property representing the homeowner's share of the cost for new projects and improvements in an area, including sidewalks, speed bumps, public utilities, or other special projects.

Assumable mortgage An existing mortgage that can be taken over by a qualified buyer when a home is sold.

Attorney fee A fee charged by a real estate lawyer for title research, contract review, and other services.

Automated underwriting The electronic review of a mortgage application for loan approval.

B

Balloon mortgage A mortgage that typically has a lower interest rate and smaller monthly payments but does not fully pay off the principal balance over the term of the loan. For this reason, the customer must make a lump-sum payment at the end of the term to cover the remaining principal. See Balloon Payment.

Balloon payment A large lump-sum payment due at the end of the loan term. Depending on the lender, it may be available on some types of mortgages, home equity lines of credit, or home equity loans.

Bankruptcy A legal proceeding in which a borrower who owes more than his or her assets may be discharged from repaying his or her debts. Although this may affect a borrower's personal liability for a mortgage debt, it would not affect the mortgage lien. See Lien.

Biweekly mortgage A mortgage with payments due every two weeks, totaling 26 payments a year.

Borrower A person who receives funds in the form of a loan with an obligation to repay the principal balance with interest.

Borrower paid mortgage insurance (BPMI) A limited insurance instrument that provides protection against financial loss, in which the cost of the mortgage insurance is added to the monthly mortgage payment. Borrowers have the right to request a cancellation of BPMI when the loan-to-value ratio reaches 80% of the original value. When the loan-to-value ratio reaches 78% of the original value, BPMI will be automatically terminated.

Break-even point The point at which a revenue or gain is equal to total expenses.

Buydown Loan transaction that involves fees paid by a person (builder, seller, etc.) to reduce the monthly payment amount for a home loan, either for the entire loan term or for an initial period of years.

C

Cash-out refinancing A refinance transaction where a portion of the equity from a home refinance is converted to funds for the borrower to use.

Cash reserve Cash that a borrower will have after the loan closing. Cash reserves may be required as part of the loan process, so the borrower has financial flexibility after the closing.

Cash to close Readily accessible cash the borrower will use to pay the closing costs for getting a mortgage.

Certificate of Occupancy Written authorization given by a local municipality that allows a newly completed or substantially renovated structure to be lived in.

Changed circumstance A situation that requires the lender to provide a revised Loan Estimate or Closing Disclosure before closing, that describes any changes in fees or other loan terms.

Chat with an Agent Online Live Help allows you to initiate a secure chat session through your computer's browser.

Closing Typically, the final step in obtaining a home loan. The closing includes delivering a deed, signing loan documentation, and disbursing funds necessary to complete the sale and loan transaction. Also known as "settlement."

Closing agent/settlement agent Usually an attorney or title agency representative who oversees the loan closing and witnesses signing of the closing documents .

Closing costs Money paid by or for the borrower at the closing of a home loan. Examples include an origination charge, discount points, and fees for required third-party services, taxes, and government recording fees.

Closing date The date your loan is finalized.

Closing Disclosure A document provided to customers at least 3 business days before closing that shows the actual terms and costs of the loan. These costs may include hazard and/or mortgage insurance premiums and escrow deposits for property taxes.

CLTV The combined loan-to-value (CLTV) ratio is calculated when financing a home with a first mortgage and a home equity line of credit. For example, if your first mortgage is 70% of your home's value and your home equity line of credit is 10% of your home's value, your CLTV ratio is 80%.

Co-borrower(s) Additional named borrower(s) who contribute to qualifying for a loan and who are equally obligated to repay the principal balance with interest.

Collateral Property used to help secure a home loan. If the loan isn't repaid by the borrower, the lender may be able to take possession of the home.

Collection The process used by mortgage servicing companies to bring a past-due mortgage current and to file foreclosure notices, if necessary.

Commitment (loan) A binding pledge made by the lender to the borrower to make a loan, at certain (or maximum) loan terms within a given period of time for a given purpose, subject to various stated conditions.

Commitment letter A lender's formal letter to a potential customer that states the terms and conditions under which the lender agrees to lend money to that customer.

Comparable properties Recently sold properties with similar characteristics that are used to help determine a fair market value of another property for sale.

Compensating factors Positive characteristics of a borrower's credit, employment, or savings history which may be used to offset high debt-to-income ratios in the underwriting process.

Concession A discount or incentive a seller gives to a prospective buyer to encourage him or her to purchase a property.

Conforming loan A mortgage that meets the most current guidelines set by the Federal National Mortgage Association (also known as "Fannie Mae") or the Federal Home Loan Mortgage Corporation (also known as "Freddie Mac"). These mortgages are eligible for sale and delivery to these government-sponsored organizations.

Contingency A condition that must be met before a contract is legally binding.

Conventional mortgage A home loan that isn't guaranteed or insured by the federal government.

Convertible ARM An adjustable-rate mortgage that can be converted to a fixed-rate mortgage under specified conditions.

Cooperative A building of two or more dwelling units that is owned by a corporation made up of people in the building. The right to occupy a unit is obtained by buying shares of stock in the corporation and signing an occupancy agreement known as a "proprietary lease".

Covenant A clause in a contract that, if violated, can result in legal action.

Credit limit The maximum amount a customer is approved to borrow.

Credit report A report provided by an independent agency detailing an individual's credit history.

Credit reporting The process where lenders and creditors share your credit activity to one or more of the three credit reporting agencies.

Credit score A three-digit number that indicates your creditworthiness that is based on information provided by your creditors and lenders. Credit scores are calculated by the credit reporting agencies.

D

Debt-to-income ratio (DTI) Used to qualify a consumer for a loan, DTI reflects the consumer's monthly debt and debt-related costs, such as taxes, fees, and insurance premiums as a percentage of their monthly gross income.

Deed A legal document that conveys ownership of a property.

Deed of Trust See Mortgage.

Default The failure to satisfy the terms as agreed in a contract.

Delinquency A loan payment that is past due.

De minimis PUD A Planned Unit Development (PUD) in which the common property has less than a 2% influence upon the value of the premises. The 2% rule of thumb is calculated by dividing the dollar amount of amenities by the total number of units within the development. See Planned Unit Development (PUD).

Department of Housing and Urban Development (HUD) A government agency that implements and administers housing and urban development programs.

Department of Veterans Affairs (VA) A government agency that administers benefit programs designed to help veterans, including home financing.

Deposit A sum of money a buyer provides to show good faith when offering to buy a home. See Earnest Money.

Depreciation The decrease in property value caused by age, physical deterioration, or other factors.

Disclosure Important information relevant to a specific product or transaction.

Down payment A percentage of the purchase price paid upfront at closing.

Down payment assistance program Programs offered by various state, county, city, and governmental coalitions including non-profit organizations designed to help more families become homeowners by providing assistance with the cost of the down payment, closing costs, or in some cases both.

Draw period The fixed period of time — for example, 10 or 15 years — when a customer can access money from a home equity line of credit.

E

Earnest money A sum of money a buyer provides to show good faith when offering to buy a home. See Deposit.

ECOA See Equal Credit Opportunity Act.

Encroachment An improvement, on or near another property, that illegally violates another's property's limits or right to use that property.

Encumbrance Anything that affects or limits title to property, such as mortgages, liens, leases, easements, or restrictions.

End of draw This applies to home equity lines of credit. It is the point when you can no longer access funds from the line. Depending on the original terms, you may be required to repay the outstanding balance as a single lump-sum payment, or with fully amortized monthly payments that include principal and interest.

End of term For a balloon home equity line of credit or an existing balloon home equity loan, end of term refers to the date the outstanding balance becomes due in full. See also Maturity Date.

Equal Credit Opportunity Act (ECOA) A Federal law requiring lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, sex, age, marital status, receipt of income from public assistance programs, or exercised any rights under the Consumer Credit Protection Act.

Equity The portion of a property's value that belongs to the homeowner and exceeds the current balance of a home loan. For example, if the property value is $100,000 and the current loan balance is $75,000, then the homeowner has $25,000, or 25% equity in the home.

Escrow Funds a lender collects and holds in an account to pay real estate taxes, homeowners insurance, other periodic debts against the property, and mortgage insurance (if applicable), on behalf of a customer. These funds are sometimes called "impounds or reserves" and refer to funds or documents held by an attorney or escrow agent to be disbursed upon the closing of a sale of real estate.

Escrow account An account held by a lender that's used to pay real estate taxes, homeowners insurance, other periodic debts against the property, and mortgage insurance (if applicable), on behalf of a customer. The lender collects a portion of these funds with each monthly mortgage payment the customer makes, and those funds are deposited into the escrow account.

Escrow agent A person or organization that ensures the terms of the loan transaction are carried out on behalf of all parties. Also referred to as an escrow company or escrow depository.

Escrow payment The portion of a homeowner's monthly mortgage payment that is held by a lender or servicer to pay taxes and insurance, including mortgage insurance and hazard insurance, on your behalf.

F

Federal Home Loan Mortgage Corporation - FHLMC (Freddie Mac) A stockholder-owned corporation created by Congress that purchases conventional mortgages in the secondary mortgage market from insured depository institutions and HUD-approved mortgage bankers. It sells participation sales certificates secured by pools of conventional mortgage loans, their principal, and interest guaranteed by the federal government through the FHLMC. It also sells Government National Mortgage Association (GNMA, or "Ginnie Mae") bonds to raise funds to finance the purchase of mortgages. Popularly known as "Freddie Mac".

Federal Housing Administration (FHA) The federal agency under the Department of Housing and Urban Development (HUD) that insures certain residential mortgages.

Federal National Mortgage Association- FNMA (Fannie Mae) A taxpaying corporation created by Congress to support the secondary mortgage market. It purchases and sells residential mortgages insured by the Federal Housing Administration (FHA) or guaranteed by the Veterans Administration (VA) as well as conventional home mortgages.

First adjusted payment After the initial fixed rate ends, the first adjusted payment reflects the new principal and interest that's due each month on an adjustable-rate mortgage. Interest rate adjustments may increase or decrease the amount due.

First mortgage A real-estate loan in a first lien position on the property that secures the mortgage. It has priority over all other liens or claims on the property in the event of default.

Fixed interest rate An interest rate that does not change throughout the life of the loan.

Fixed-rate advance (FRA) A feature of a variable-rate home equity line of credit that allows the borrower to secure, or "fix", the interest rate on all or a portion of their current owed balance.

Fixed-rate mortgage A mortgage with an interest rate and monthly principal-and-interest payment amount that remains the same for the life of the loan.

Floating interest rate When a mortgage applicant allows the interest rate to fluctuate for a short period of time until he or she decides to lock it in.

Foreclosure A legal procedure in which property mortgaged as security for a loan is sold to pay the defaulting borrower's debt.

G

Gift letter A written explanation, signed by the individual giving the gift, stating that money was given to a homebuyer as a gift without any obligation to repay it.

Ginnie Mae Created in 1968 by an amendment to Title III of the National Housing Act (12 USC 1716 et seq.), this federal government corporation is a constituent part of the Department of Housing and Urban Development. Among other governmental functions, it guarantees securities backed by mortgages that are insured or guaranteed by other government agencies. Also called Government National Mortgage Association (GNMA).

H

Hazard insurance Contract with an insurance provider that specifically covers damage to a property due to certain hazards such as fire.

High-ratio loan Mortgage loan with a loan- to-value higher than 80 percent. Calculated using the loan amount divided by the lower of the sales price or appraised value.

Home equity line of credit A form of revolving credit secured by a borrower's home. A borrower is approved for a specific credit limit and can draw on those funds up to the limit as needed during the draw period, making monthly payments as required according to the signed contract.

Home loan processor The Wells Fargo team member who collects the mortgage application and supporting documents for review.

Home mortgage consultant The Wells Fargo team member who helps customers understand their home financing options.

Home Mortgage Disclosure Act (HMDA) Federal legislation that requires certain types of lenders to compile and disclose data on where and to whom their mortgage and home improvement loans are being made.

Home Valuation Code of Conduct (HVCC) The Home Valuation Code of Conduct establishes standards for solicitation, selection, compensation, conflicts of interest, and appraiser independence. It became effective May 1, 2009, for any mortgage that will be sold to Fannie Mae or Freddie Mac; Federal Housing Administration (FHA) and Federal Home Loan Bank (FHLB) mortgages are not covered in the agreement.

Homeowners association dues Fees a homeowner is required to pay to a condominium or homeowners association for maintenance of common areas.

Homeowner's insurance policy A multiple-peril insurance policy available to owners of private dwellings that covers the dwelling and its contents, as well as personal liability.

Housing and Economic Recovery Act (HERA) Federal legislation enacted in 2008 to address the subprime mortgage crisis. It was intended to restore confidence in Fannie Mae and Freddie Mac by strengthening regulations and injecting capital into the two large U.S. suppliers of mortgage funding.

Housing and Urban Development (HUD) See Department of Housing and Urban Development.

Housing expense ratio The ratio comparing housing expenses to before-tax income that's used by lenders to qualify customers for a mortgage.

I

Impounds or reserves Terms used to mean "escrow" in some parts of the country. See Escrow.

Income/expense ratio See Debt-to-Income Ratio (DTI)

Index/index rate A published interest rate, such as the prime rate, that lenders use to establish interest rates charged on mortgages or to compare investment returns.

Interest The amount a borrower owes a lender for the use of borrowed money. Also a right, share, or title in property.

Interest-only payments A type of payment available on certain loans that minimizes the amount you pay for a set period of time. The payment is applied only to interest, and the principal balance is not reduced. At the end of the interest-only period the payments will adjust to include principal and interest resulting in a higher monthly payment.

Interest rate The cost a customer pays to a lender for borrowing funds over a period of time expressed as a percentage rate of the loan amount.

Interest rate cap A provision of an ARM limiting how much the interest rate may increase per adjustment period. See also Lifetime Cap.

Interest rate floor The lowest interest rate that can be charged on an adjustable or variable interest rate loan or line of credit.

Interest rate range The lowest to highest interest rates available for a particular loan or line of credit.

Interim interest The interest accrued between the date a loan closes and the end of the month, which is paid at the time of closing.

Investment property Real estate property owned with the intent to earn income, either through rent, future resale, or both, and not intended for owner occupancy.

L

Land acquisition loan A loan made for the purpose of purchasing land only. This does not include improvements on or to the land.

Late charge The penalty a borrower must pay when a payment is made after its due date or courtesy period.

Lender paid mortgage insurance (LPMI) A limited insurance instrument that provides protection against financial loss, in which its cost is included in the interest rate. Although the interest rate is slightly higher with LPMI, this option usually results in a lower monthly payment and a potential tax deduction. (Consult your tax advisor.)

Liability coverage Optional insurance designed to protect against expenses incurred due to property damage or injury occurring on the property.

Lien A legal claim by one party on the property of another as security for a debt.

Lifetime cap The limit on how much an interest rate can increase above the initial interest rate over the life of an adjustable-rate mortgage or variable-rate home equity line of credit.

Limited partnership A form of business ownership that consists of one or more general partners who are fully liable, and one or more limited partners who are liable only for the amount of their investment.

Line of credit See Home Equity Line of Credit.

Liquidity The ability to readily convert assets or investments into cash.

Loan conditions Terms under which a lender agrees to make a loan. They include the interest rate, number of years of the loan, and any requirements the borrower must meet before closing.

Loan Estimate A document delivered or mailed to customers by a lender within 3 business days of mortgage application. The Loan Estimate provides an estimate of closing costs and fees as well as the loan terms.

Loan modification An agreement to revise the terms of a mortgage, often used to help qualified customers bring their mortgage current or reduce their mortgage payment.

Loan-to-value (LTV) ratio The current loan amount compared to the value of the property, expressed as a percentage. For example, a loan amount of $150,000 for a home valued at $200,000 would have an LTV ratio of 75%.

Lock expiration date The date on which the interest rate lock-in period ends, allowing the interest rate to fluctuate with the market.

Lock-in period A set number of days during which the interest rate is secured and not subject to market fluctuation.

London Interbank Offered Rate (LIBOR)

The rate at which banks in the foreign market lend dollars to one another. LIBOR varies by deposit maturity. A common interest rate index; one of the most valid barometers of the international cost of money.

Loss payable clause An insurance policy provision for payment of a claim to someone, other than the insured, who holds an insurable interest in the insured property.

Market value The most probable price that a ready, willing, and able buyer would pay, and a willing seller would accept, assuming each is fully informed and under no pressure to act.

Maturity date The date when a loan's final payment or loan balance must be paid in full. For a balloon home equity line of credit or an existing balloon home equity loan, the maturity date is when the outstanding balance becomes due in full.

Mobile home A factory-assembled residence consisting of one or more modules, built on a chassis and wheels, connected to utilities, designed without a permanent foundation, and intended for year-round living.

Modular house A factory-assembled residence built in sections in a factory and then transported to a permanent site where it is constructed on a foundation. Excludes mobile homes.

Monthly payment The amount of principal and interest paid each month on a home loan. If the mortgage has an escrow account, the monthly payment will include real estate taxes, homeowners insurance, and, if applicable, mortgage insurance.

Mortgage The transfer of an interest in real property, given as security for the payment of a loan.

Mortgage broker Someone who accepts a fee to match mortgage customers with lenders.

Mortgage commitment An agreement between lender and borrower detailing the terms of a mortgage loan such as interest rate, loan type, term, and amount.

Mortgage insurance See Private Mortgage Insurance.

Mortgage insurance premium (MIP) Mortgage insurance protects the lender or others if the borrower doesn't make the required payments. If a home loan has mortgage insurance it may be collected as part of the monthly payment.

Mortgage note A document signed by a customer that is an acknowledgement and agreement to repay a sum of money at a stated interest rate for a specific term. When the note is secured by a property, it is called a mortgage note.

Mortgagee The lender in a mortgage transaction.

Mortgagor The borrower in a mortgage transaction. The mortgagor pledges property as security for the debt.

Mortgage loan originator Someone who accepts a fee to take a mortgage loan application or to negotiate its terms.

N

Nationwide Mortgage Licensing System and Registry (NMLSR) The Nationwide Mortgage Licensing System and Registry (NMLSR) is a repository developed and maintained by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators. The purpose of the NMLSR is to streamline the licensing process, improve supervision, and increase transparency in residential lending.

Negative amortization A loan payment schedule in which the outstanding principal balance goes up, rather than down, because the payments do not cover the full amount of interest due. The unpaid interest is added to the principal balance.

Neighborhood Stabilization Program (NSP) A program funded by the Department of Housing and Urban Development (HUD) through the American Recovery and Reinvestment Act (ARRA) of 2009 and designed to provide funds to assist homebuyers in purchasing foreclosed residential properties in targeted areas for the purpose of stabilizing neighborhood property values.

New principal balance The recalculated loan amount in a loan modification agreement, which includes the original principal amount and may include previously unpaid interest charges or fees.

NMLSR ID A number or other identifier that permanently identifies a registered residential loan originator. The Unique Identifier is assigned by protocols established by the Nationwide Mortgage Licensing System and Registry and other agencies. It also may be referred to as a Unique ID.

Non-conforming loan A conventional mortgage that is not eligible for sale and delivery to either Fannie Mae or Freddie Mac due to the loan amount, loan characteristics, underwriting guidelines, or other factors.

Note A document signed by a customer that is an acknowledgement and agreement to repay a sum of money at a stated interest rate for a specific term. When the note is secured by a property, it's called a mortgage note.

P

Payoff figures A calculation of the amounts required to pay a loan in full.

Personal property Usually considered to be property that is movable, as opposed to real property such as vacant or improved land, like a home.

Planned Unit Development (PUD) A comprehensive development plan for a large land area. A PUD usually includes residences, roads, schools, recreational facilities, and commercial, office and industrial areas. A PUD may also be a subdivision with lots of areas owned in common and reserved for the use of some or all of the owners of the separately owned lots. See also De minimis PUD.

Plans and specifications Architectural and engineering drawings and specifications for construction of a building or project. They include a description of materials to be used and the manner in which they are to be applied.

Power of Attorney A legal document authorizing one person to act on behalf of another.

Preapproval A preapproval letter shows that a mortgage applicant has been preapproved for a specified mortgage amount based on a preliminary review of credit information and other documents.

Preliminary title report The results of a title search by a title company prior to issuing a title binder or commitment to insure clear title.

Prepaids That portion of your loan closing costs which must be collected at closing to cover taxes, interest, and insurance.

Prepayment fee or penalty On some loans, a fee that may be charged if the borrower pays off the loan earlier than originally agreed in the lending contract.

Prequalification An estimate of the amount a prospective homebuyer may be able to borrow prior to submitting a formal application. A prequalification does not include a credit check and should not be confused with preapproval.

Primary residence Property that is occupied or intended to be occupied as a person's main home.

Principal The amount borrowed or the remaining unpaid balance of a loan excluding unpaid accrued interest; also refers to the portion of the monthly payment that reduces the outstanding balance of a loan.

Principal balance The amount owed on a loan, not including interest, fees, or taxes.

Principal payment The portion of a monthly payment that goes toward reducing the principal balance on a loan.

Private mortgage insurance (PMI) Insurance written by a private company protecting the mortgage lender against loss resulting from a mortgage default.

Processing The preparation of a mortgage loan application and supporting documentation for consideration by a lender or insurer.

Property usage Denotes whether a property is a first home, second home, vacation home, or a rental property.

Purchase contract (agreement/offer) An agreement between a buyer and seller of real property that states the price and terms of the sale. Also known as a "sales contract."

R

Rate cap The maximum that an interest rate can change on a loan or line of credit .

Rate lock An agreement between the borrower and lender that holds the interest rate range, points, and term of the loan for a specific time period.

Real assets Real estate or real property owned by an individual or business.

Real estate See Real Property.

Real estate/property taxes Taxes assessed on real property, collected by a local government, and usually based on the property's value.

Real Estate Owned (REO) A foreclosed property, also known as a Real Estate Owned (REO) property, is a home that was once customer owned but is now owned by a bank. A foreclosure can occur when mortgage payments are not made over a period of time and measures taken to help are not satisfied.

Real Estate Settlement Procedures Act (RESPA) A federal law requiring lenders to provide home mortgage borrowers with information on known or estimated settlement costs. It also establishes guidelines for escrow account balances.

Real property Land and anything attached to it, like a home, that's not movable.

Refinancing The repayment of a debt from the proceeds of a new loan using the same property as security.

Reissue or refinance rate (for title insurance) A reissue or refinance rate is a reduced rate for title insurance that a homeowner may be eligible for on a refinance. The reduced rate may be applicable if the property was previously insured within a certain number of years.

Repayment period For a standard home equity line of credit, the point at which a borrower must begin to make fully amortizing monthly payments, or principal-and-interest payments that will completely repay the outstanding balance during a certain period of time.

Rescission period Under federal law, certain loan transactions secured by your home are subject to a rescission, or cancellation, period. Following receipt of all required disclosures and consummation of the contract, each owner of the property has up to three full business days to cancel the transaction. The right to cancel does not apply to loans made to purchase, construct, or acquire a primary residence, or to transactions secured by a secondary residence, vacation home, or rental property.

Responsible Lending Principles The fair lending practices that Wells Fargo follows throughout the home lending process.

Responsible Servicing Principles The fair servicing principles that Wells Fargo follows after originating or acquiring a home loan.

Revolving line of credit A line of credit that gives the customer access to available funds during the specified draw period. As the customer repays the principal during the draw period, the funds (up to the credit limit) would be available to draw again.

S

Sales contract See Purchase Contract.

Satisfaction of mortgage The document issued by the lender verifying full payment of a mortgage debt.

Second home (vacation home, weekend home) A residence other than the customer's primary residence where the customer plans to live for a portion of each year. The residence must be fit to occupy year-round.

Second mortgage A mortgage that has rights that are subordinate to the rights of the first mortgage holder. Home equity loans are often referred to as second mortgages because the borrower typically is still paying off their home mortgage; if the home mortgage is paid off, the home equity loan is then considered to be a first mortgage.

Secondary mortgage market A market where existing mortgages are bought and sold. It contrasts with the primary mortgage market, where mortgages are originated.

Section 203(k) loan program HUD's primary program for the rehabilitation and repair of single-family properties. A 203(k) loan is a first mortgage that covers the costs of rehabilitation and purchase or refinance of an eligible property. The goals of the Section 203(k) loan program are community and neighborhood revitalization and expanded opportunities for homeownership for low- and moderate-income families.

Security Collateral or property given, deposited, or pledged to secure the repayment of a loan.

Security instrument Mortgage or Deed of Trust evidencing the pledge of real estate as collateral for the loan.

Security interest The interest of a creditor in the security acting as collateral for an investment.

Seller contributions Payment by the seller of some or all of the buyer's closing costs in a real estate transaction. Depending on the terms of your loan, the amount of seller contributions can be limited.

Settlement costs Fees and charges associated with the closing of a mortgage loan, such as origination fees, discount points, or payments for title insurance, surveys, attorney services, and taxes.

Site value The value of land without improvements, as if vacant.

Subdivision Improved or unimproved land divided into parcels for sale, lease, financing, or development.

Subordinate To make subject or junior to. For example, a loan on vacant land is made subject to a subsequent construction loan. Also described as a Second Mortgage. See First Mortgage.

Survey The measurement and description of land by a registered surveyor.

T

Term The time frame when a loan or home equity line of credit must be repaid.

Title A document that shows current ownership of a property, plus a history of previous owners.

Title (insurance) company A company that confirms the legal claims to a property and insures a homeowner and lender against a loss that could result from a title dispute.

Title insurance An insurance policy that protects a lender and/or homebuyer against any loss resulting from a title error or dispute.

Title insurance policy An insurance contract in which an agreement is made that the insurer, usually a title insurance company, agrees to pay the insured party for losses relating to claims against title.

Title search An examination of public records that discloses the past and current facts about the ownership of a property to determine who has valid claim to the property.

Torrens certificate A certificate issued by a public authority called a registrar of titles, establishing title of an indicated owner. Used when title to property is registered under the Torrens system of land registration.

Transfer tax State or local tax payable when ownership of property passes from one owner to another.

Trust deed See Deed of Trust.

Truth-in-Lending Act (TILA) A Federal law requiring full disclosure of credit terms using a standard format. This is intended to facilitate comparisons between lending terms and financial institutions.

U-Z

Underwriter The Wells Fargo team member who reviews the application, documentation, and property information before making a loan decision.

Underwriting Analysis of risk and setting of appropriate rate and terms for a mortgage on a specific property for specific borrowers.

Uniform Residential Loan Application (URLA) A document required for all mortgage applications that includes the customer's income, assets, and a description of the home.

Upfront Mortgage Insurance Premium (UFMIP) An upfront mortgage insurance premium (UFMIP) is required for all FHA loans, and it is typically financed into the mortgage loan amount or paid by the customer in cash at closing.

Veterans Administration (VA) mortgage A mortgage that provides flexible qualifying guidelines for eligible veterans and other eligible borrowers, which may include financing the VA funding fee and obtaining the loan with no down payment. Also, there is no mortgage insurance required.

Yield to maturity The lender's percentage of annual return on actual funds loaned, assuming that the loan will be paid in full at maturity.